MVA Litigation

The answer should be a resounding “no,” according to the United States and Commil USA, LLC, the recipient of a multi-million dollar jury award against Cisco Systems, Inc.  Last week, the U.S. Supreme Court heard arguments in Commil USA, LLC v. Cisco Systems, Inc. (No. 13-896), which probes whether one who induces infringement of another’s patent can avoid liability under 35 U.S.C. § 271(b) of the Patent Act by claiming that they had a good-faith belief that the patent at issue was invalid.  Recall from our previous discussion, Commil won a jury verdict against Cisco for $74 million for Cisco’s role in inducing the infringement of Commil’s patent.  The Federal Circuit Court of Appeals vacated Commil’s award and ordered another trial, requiring the trial court to consider Cisco’s good-faith invalidity defense.  During arguments before the Supreme Court, the United States joined Commil in urging the High Court to undo the good-faith belief of invalidity defense recognized by the Federal Circuit, warning that the defense would “gut” and “eviscerate” the induced infringement statute and is based on erroneous interpretations of the Patent Act and key Supreme Court case law.  Cisco maintained that recognition of the good-faith invalidity defense is proper given the intent requirements for establishing induced infringement and the notion that “[b]ecause patent infringement presupposes patent validity, knowledge of infringement requires knowledge of validity.” Several interesting points of contention drove the briefing and arguments in the case, including:

• What is the actual meaning of the Supreme Court’s declaration in Global-Tech Appliances, Inc. SEB S.A., 131 S.Ct. 2060 (2011) “that induced infringement under § 271(b) requires knowledge that the induced acts constitute patent infringement,” given the Court’s reliance on Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476 (1964) (“Aro II”), which had found knowledge of the patent and notice from the patent holder of alleged infringement to be sufficient to meet the intent requirement for contributory infringement under § 271(c)?
• Whether there is a discernible distinction between a good-faith belief of non-infringement defense and a good-faith belief of invalidity defense?
• Should the intent requirement for induced infringement be treated similarly to aiding and abetting liability in tort or criminal law?

Knowledge Required by Global-Tech and Aro II.  In articulating the knowledge requirement for induced infringement, the Supreme Court explained in Global-Tech:

It would thus be strange to hold that knowledge of the relevant patent is needed under § 271(c) [for contributory infringement] but not under § 271(b). Accordingly, we now hold that induced infringement under § 271(b) requires knowledge that the induced acts constitute patent infringement.

Commil presented the dispute in this case as being “fundamentally predicated on conflicting interpretations of what Global-Tech’s reference to ‘knowledge that the induced acts constitute patent infringement’ means.”  Cisco urges that Global-Tech establishes that the “linchpin” is knowledge that the induced acts violate the rights of the patent holder; therefore, if the alleged infringer believes the patent was invalid there is no intent.  But, is there a place in a defense for an inducing infringer’s subjective belief that a patent was invalid when they have knowledge of the patent and the alleged infringing conduct?  Commil argued that the Supreme Court explicitly relied on Aro II in deciding Global-Tech, which aligned the knowledge requirements for contributory infringement and inducing infringement.  Commil urged that, as in Aro II, “once the inducer has knowledge of the patent and its potential relevance to its conduct vis-à-vis infringement (e.g., through discussion with the patent owner, a notice letter from a patentee, reading public materials, or internal review), the intent requirement is satisfied.” Commil reads Aro II as making no room for a defense based on the infringer’s subjective belief about the merits of the infringement claim.

Commil stressed that Global-Tech was a case in which the alleged infringer had no knowledge of the patent.  In a case where there is knowledge of the patent, as in this one, Commil urged that the standard articulated in Aro II should guide the court. Commil also suggested during arguments that the Supreme Court should clarify Global-Tech, noting that “knowledge of the relevant patent” is not the same as “knowledge that the induced acts constitute patent infringement.”  During the government’s argument addressing the Court’s intent with respect to these two statements, Justice Scalia quipped “Are we that dumb…that we would say those two things in successive sentences?” Justice Kagan expressed the view that the breadth of the Global-Tech holding was clear, regardless of the factual circumstances.  We will see to what extent the Court takes Commil’s invitation to clarify Global-Tech in its ruling. 

Non-Infringement vs. Invalidity.  The Federal Circuit proceeded on the foundation that “[i]t is axiomatic that one cannot infringe an invalid patent” in declaring that “a good-faith belief of invalidity may negate the requisite intent for induced infringement.”  But, the parties and the Supreme Court probed whether this underlying “axiom” proclaimed by the Federal Circuit is indeed true, and the impact that answer has on the viability of the good-faith invalidity defense.  Cisco urged that practicing an invalid patent does not violate any rights of the patent holder, therefore an alleged inducer who reasonably believes in good faith that the patent is invalid lacks the intent required for induced infringement liability.  Commil and the United States argued, however, that establishing that a patent is invalid is not a means of refuting a claim of infringement.  They pointed to the construct of the Patent Act and Supreme Court precedent, which draw a distinction between the defenses of non-infringement and invalidity, and the presumption of patent validity that is established in patent law.  By definition, they argued, a patent is infringed if a defendant practices all of its elements without authorization, regardless of whether it is valid.  An accurate read of the law in their view is that “a finding of invalidity does not negate the fact of infringement, but instead precludes liability for that infringement.”  Accordingly, “an inducer who knows that the induced conduct practices a patent, while believing that the patent is invalid, knows that it is inducing ‘infringement’ as that term is properly understood.”  The Supreme Court pushed to determine whether there truly is a distinction between a good-faith non-infringement defense and good-faith invalidity defense or whether they are just “two sides of the same coin.”  Justice Sotomayor did acknowledge that infringement and invalidity are treated differently in the law, particularly with respect to the burden of proof on the patent holder and alleged infringer.  While a patent holder has the burden to prove infringement, an alleged infringer has the burden to prove invalidity of the patent given the presumption of patent validity.  

Aiding and Abetting vs. Inducing.  Cisco attempted to categorize the induced infringement liability under section 271(b) as an aiding and abetting liability that should carry a similar mens rea or intent of wrongdoing requirement as in tort and criminal law.  Commil countered that aiding and abetting liability does draw a distinction between merely “assisting” in wrongdoing and “inducing” wrongdoing in that the inducement of wrongdoing carries a “much lower scienter and intent.”  Justice Sotomayor similarly noted this distinction in probing Cisco’s counsel: “[b]ut, you’re not aiding and abetting…you’re inducing…you’re appointing a surrogate and you’re saying, you do it for me….”  Although, Cisco’s position did resonate with some Justices, including Justice Scalia who stated that induced infringement “is a type of aiding and abetting liability….At the common law, it was clear that you’re not liable as an aider and abetter unless you have a wrongful intent.” 

Distinctions Without a Difference?  The Federal Circuit found “no principled distinction between a good-faith belief of invalidity and a good-faith belief of non-infringement for the purpose of whether a defendant possessed the specific intent to induce infringement of a patent.”  Yet, the good-faith invalidity defense has been viewed as a threat to the continued viability of induced infringement claims.  The federal government warned that the good-faith invalidity defense could essentially gut the induced infringement provisions of the Patent Act by giving life to new good-faith defenses based on every possible defense to infringement liability.  The various questions raised in Commil probe whether there are legal distinctions that can invalidate or justify this novel defense.  But, the issue can be simplified in Commil’s view: “[patents] should be respected not just by judges and juries, but by the public who are told that until proven otherwise, patents are presumed valid. And someone who wishes to gamble on their belief that it's invalid should bear the consequences if they're wrong.”  Ultimately, we will look for the Supreme Court’s clarification as to whether any distinctions raised regarding these issues truly are distinctions without a difference.